Posted
by
Cliffon Monday December 08, 2003 @07:10PM
from the getting-a-hold-of-a-real-bargain dept.

jeffy124 asks: "I was hoping to get an Apple iPod for Christmas. Alas, it's too expensive and out of the budget. So I'm forced into purchasing it for myself. Hoping to cash in on a holiday season bargain, I've been keeping my eye on the sales circulars that come in the newspaper. I've seen plenty of discounts for MP3 players of all kinds (Rio's, Dell's new HD-based player, etc), and the iPod has also shown up. Christmas does not yet seem very merry to me. They're always at the regular $299/399/499 price, never at a discount of any sort. You read that right, it's 'for sale' at the *regular* price. Stores guilty of this include Best Buy, Circuit City, Target, and CompUSA. Why do stores do this? How often? And does anyone know why Apple has been singled out while their competition has gotten their products discounted? Anyone know who *is* granting discounts on iPods this holiday season?"

"The other day came in the mail a 10% off coupon for various items at Best Buy, including 'MP3 Players' as indicated on the front of slip. Hoping this was how I was gonna get that discount, I set aside time this weekend to drive to Delaware in order to skip out on my local state sales tax too. I turned the coupon over, and in the legal disclaimer was the phrase 'Excludes Apple iPod Players.' Needless to say, a Merry Christmas is still aways off."

I bet it sort of works like the Gamecube price. The company selling the product sets an artifical price limit. In order to be able to sell the product you have to sign a contract agreeing to the price point. So best buy must have signed some sort of agreement with apple and it cannot lower the price. Simple.

I bought my Ipod over the summer used from amazon.com. I know their are people who have issues with the battery longevity but I have not noticed any problems. Best thing was I payed $150 for a 10gig Ipod.

This seems to be the case with a lot of products in the retail environment. Gaming consoles come to mind. While many retail products in the big box stores are discounted due to wholesale bulk purchasing, some products manufacturers just won't let the retailer alter the price, because it doesn't jive with their "Marketing" plan.

from macresq.com. I'm happy to say, well, the only damage i could find was on the box. It had some sticky stuf from duct tape and it had a dented corner. woohoo. As for the iPod, it was a 2G 10 GB one. Battery came full, and it came with all that... earphones, iPod, firewire cable, AC adapter brick, that case, the remote... yeah. Firmware was also up-to-date (although that's old compared to the new iPods.) The point is, the iPod itself had really no scratches. Shipping was also free (got it on Thankgiving weekend, coupon code GOBBLE) so that was great. It works, real nicely, I might add. I can't ask for anything else. Oh, they're restocking on some 3G iPods. 10 GB, 15 GB, and 30 GB, I believe. I'd say they did a good job on sending it quickly and all. Hmm... if you're buying anything else from them, don't do it. Ripoff prices. If you're getting an iPod? I have to say, go for it! THEY'RE AS GOOD OR CHEAPER THAN EBAY MOST OF THE TIME. CHECK FOR YOURSELF. There might be exceptions, of course, but I didn't see many.

i am in the market for a digital camera. no matter where you go, they are all the same price. exactly the same price. it's been afew years since i worked retail, but this is a defense mechanism of sorts. one, since nobody is the low price leader, and everybody price matches, then nobody gets screwed, everybody sells some. besides, that way, store A doesn't run out, while store B gets screwed, which also pisses off customers. and it encourages people to buy now, because they ain't gonna find it cheaper next door. it also allows the stores to add on their own deals and warranties. this is where they make the big bucks. you even see this trend with cars. the price is the price. the real difference is in service. i for one will not shop in best buy, etc., because their sales drones don't know shit. i would rather go to ritz camera, and i know that the price is the same. manufacturers have been trying to do this for some time. there was a famous case a number of years ago with browning shotguns. they wanted all dealers to price them the same. went to court and lost. but, if you look at the hardware market, the markup is almost nil. as for ipods, you bet your ass that if you sell it for $1 less than apple without their approval, you'll never get another shipment. macmall sells their hardware for $5 less, but i guess they got a deal from apple. and besides,l they always throw more memory, etc., in with the deal. just don't expect things to change. and truthfully, i think customers like it better. if you want a good deal, go to ebay.

Yeah, this is pretty common. Microsoft does this all the time with their retail software and the X-BOX.

What annoys me Mail-In-Rebates. It seems like all of the advertized prices for Best Buy, Comp-USA, Staples, yada yada, require rebates. Some require two or more. Rebates suck because you have pay up front, go to the trouble of mailing them in, and then you have to wait 4-6 weeks and hope. Plus you get nailed for the full price on the sales tax.

Yeah maybe, but the difference between the Gamecube (including all other consoles) is that the price is fixed because they lose money on the things (they make it up in game sales) and deep discounts could cause future pricing problems. ie; You become used to discounted consoles and then the next one to come out needs to be priced lower then before, thereby losing the console mfg even more money (and potentially sales). With regards to the iPod, Apple is making a fortune selling these things and if you read the article linked off of today's mac rumors you will see that they chose to come out with a Windows version of iTunes despite knowing that they would sell less macs simply because the iPods make them that much money.All said, I think price fixing is dishonest in all circumstances (unfortunately not illegal in these cases) but to varying degrees. In this case Apple is further in the wrong in my book.

Apple (just like any other manufacturer) charges the stores X dollars to carry a product (the store actually has to buy them...). This is called the wholesale price. Now Apple's wholesale price might be really, really close to the MSRP. In order for a store to make a profit, they MUST charge more than the wholesale price.

Video Game Consoles and other hardware usually has a high wholesale price so the retail price is usually never discounted. Software (Games, CDs, DVDs, et cetera) usually have a very low wholesale price so some stores will give you wicked discounts on them in the range of 10%-30% and in some stores even %50.

I know this probably won't happen for many of you, but I swear this to be the truth..

I sent my wife up to Best Buy when they were having their 10% off thing this weekend. I already saw on the coupon it said mp3 players 10% off (except Ipods). I told her to take it anyways, but then she lost it, ah well - so she did take the double-your-best-buy-reward-zone coupon.

She picked up the 40G ipod, a armband case or whatever, and the extended service plan.

At the register, she gave them her coupon, and the girl working the register said "Do you have your 10% off coupon as well?", and my wife said she didn't, so the girl went to a couple other registers to find one!!! She let it go through, too.

And, my wife doesn't know what happened after that, but she started talking, walked away, and found another 10% off coupon.

So, everything we bought only cost about $520 after tax. Ahhh.. And I was going to be content getting my 800,000 reward zone points.:-)

That's what I paid several months ago, so it's probably even less, now. If you can live with refurbished, you'll save a bundle. I haven't had any problems. In fact, I almost trust refurbished products more than brand new ones, because they've been checked over a second time, presumably more thoroughly than the first time they passed through the QA department.

Even more likely is that iPod sales are good at their current price points. Offering a product for $249 when people are lining up to pay $299 for it is generally bad marketing (unless it gets them to buy something else too).

Here is how it works at the computer store I work at (we are an authorized reseller): We pay MSRP for the product and at the end of each month (I believe that is the time frame), we get a certain refund from Apple. This effects not only the standard pricing you see, but employee discounts as well; since there is no "at cost" pricing on Apple products, the non-marked up price that our employees get on just about everything else in the store doesn't actually exist; thus we have to buy Apple at full MSRP. Just my side of the story.

It appears, Dingleberry, that you have a disturbingly common misconception: that because only Apple makes Apple products, that makes them a monopoly. I will first give a relatively standard answer: does Sony have a monopoly because only they sell PlayStations? No. If Sony were the only company that sold gaming consoles, or held a supermajority of the market, and they actively fought to keep it that way, then they would be in a monopoly position. If Apple were the only company that sold MP3 players, or held a supermajority of the market, and actively fought to keep it that way, then they would have a monopoly and your position would be reasonable.

The other difference is that between monopoly pricing and price fixing. The former can only be done by a monopoly that holds a supermajority of the market in a particular commodity (a single company). The latter can only be done by what is commonly known as a cartel, a group of companies in the same industry that get together to decide what the price of the good or service they all sell should be. If they collectively hold enough of the market, they can keep prices as high as they want, because the competition cannot make enough of a dent in their market share to really compete.

You can be sure that even if the market share of the iPod dropped from its current level of (I believe) about 80% down to 40%, Apple would not lower the price by a significant amount. This is because Apple doesn't keep the price high to gouge us or because they're a monopoly, they do it because that's the kind of company they are: they make expensive, high-quality, high-profit-margin items that people buy because they're the best, not because they're the most affordable. In other words, they're not a monopoly, and nor are they trying to compete on the same footing as companies like Dell and HP, which always compete on price. They compete on quality, instead.

Simple solution to a simple problem. Go to Apple's website and go to their Store page. On the left hand side, it says Government. Click buy for yourself. Agree to their little thingy and the prices drop from $299,$399,$499 to $269,$359,$449. Can't beat that.

20-25% is considered a good to very good margin % for retail, with goals being 25-35%. now in computers, most hardware has very little margin, typically 2 to 12% rarely higher. this applies to computers (desktops and laptops), lcds, monitors, printers (Though some of these actually do have nice margins, especially new and unique technologies), hard drives, cdroms, etc. retailers make money off computers by attaching things to them, such as cables, service plans/warranties, isp commissions, service labor, and other accessories, but this is just a minor part of the road to profit/margin. the bigger part is that if you buy your computer at store A, you are very likely to buy your software at store A, and have your computer serviced at store A, and of course shop for other things at store A.
If you are happy with your computer purchase, and a month later need to get a new fridge, where do you go? yah, Store A...margin on a fridge? upwards of 25% typically, as much as 50, sometimes even higher.
I work as a service technician at a best buy store. i see so many products come back from service with 20-80% of the original cost of the unit in parts and labor charges, but $0 cost for the customer because its covered under psp, its amazing. Ive actually seen a laptop get the mother board, cpu, memory, harddrive, lcd and keyboard replaced on one service ticket, 0 cost to the customer, itemized billing = nearly 90% the original cost of the unit, 18 months after purchase. basically the customer got a new laptop with their old case, floppy and cdrom drives. the hd was larger than original and the cpu was a click faster (i think a 1.3ghz instead of a 1.2).
then again, ive had to deal with so many upset customers who say "ive only had it 13 months and it doesnt work anymore!"... all i can say is "sir, we can fix it, but it will cost more than its worth to replace". should have bought the psp.
As for the rebates thing...if you send them in, you will get your money (at least on best buy rebates), but you would not believe how many people dont take the time to send in those 100 and 150$ rebates...
i do not speak on behalf of best buy, the thoughts above are mine and mine alone.

If Sony were the only company that sold gaming consoles, or held a supermajority of the market, and they actively fought to keep it that way, then they would be in a monopoly position.

Actually, then they'd be an illegal monopoly. They don't have to be fighting to keep it that way in order to be a monopoly - There are multiple legal ways to maintain a monopoly in American Capitalism, and others can probably give you better examples than I.

Sorry to be pedantic, it's just a common misperception and I felt like clearing it up.

What's wrong with that? If they want to charge $X for a price of a product and allow no discounts, that's their perrogative. If people don't like the price, they buy something else. I can see this as a good thing for Apple's own stores as well as their licensed dealers. They don't have to worry that much about the online stores cannibalizing their sales. An iPod, iMac, or PowerMac is about the same price, no matter where you buy it. The sellers can compete with non-Apple goodies and it's up the buyer if they want to pay shipping or sales tax. People absolutely hate buying an object only to find out that another store/website was selling the exact same thing for a significantly less amount.

So while you complain about price gouging on the high end, remember the non-existent profit margins on the low. Keep in mind too that those customers buying the CDN$20 computers ('cause that's what they're worth to me) are the biggest pains - they're going to take forever to make a decision, ask you to explain why your iMac is better than a Dell at $50 less, come back regularly and ask questions which you think should be obvious.

And this is why older machines (Pentium-2, Pentium-3, etc) stop being sold - as the price gets lower, so does the profit margin. The computer industry works on pretty slim margins for a lot of things (I used to sell stuff on the side with a 10% markup, and my prices weren't much better than anyone else's). The only way they can make any real money is by selling a $2500 system (where they may make $250). A $250 system only makes them $25 - hardly worth getting out of bed, when you have to cover rent on your store, etc.

Retail stores will often advertise their price without discounting it any

It's all abouy psychology...I will now relay an actual event I witnessed when working at a walmart shoe department many eons ago:

(lady standing in a long layaway line) "Young man, how much are these boots over here? (she points to some boots on sale).
(me) "They appear to be $18.00".
(lady) "Are they good boots?"
(me) "Good for the price."
(lady) "How much were they originally?"
(me) "ummm, let me look, ummmm $19.88"
(lady) "Well thats not a very good deal!"
(a second lady chimes in) "Nawww, those were $26.99 last week I know cuz I got my husband some."
(lady) "Oh! Well in that case I'll get a pair."

I work for a rather large (fortune 1000) computer reseller, that sells Apple products. I am part of a business to business outbound call organization.

I can tell you, even though I deal in corporate sales, a fair amount of my company contacts are interested in IPODs for themselves or families. I usually "wheel and deal" for them, for the holidays. I figure it's a benny I can offer for working with me.

I can tell you that there is barely any money to be made in reselling apple hardware. If you show me a piece of apple hardware, Imac, g5, ipod, etc, that my company makes more than 8 or 9 points of margin on, I'll be impressed.

Most apple hardware is around 6 points of gross margin. About the only thing you can make good money at in the apple world is selling support, be it your own support, or their "applecare" estended warranties.

I can tell you that my company, and my competition, to compete, absolutely will not offer a discount on the ipod. At less than 8 points of margin, what's the point of selling them? We will however, offer an IPOD bundled with say, deluxe headphones, or a "mobility pack", etc, for a little more to compete and offer a deal.

You see the same thing with PlayStation 2's. 179.95 or whatever is set by contract, but you can offer discounted items with it to get a competitive edge.

I know before I was in this business I always thought "A 600 dollar thing, they make a ton of money" or "a $2000 computer, wow, i can find it for 1500 somewhere else!" It's simply not true. Due to a competitive marketprice, you are lucky to make 8 points of margin on a PC Box. And Apple... I only assume they are taking most of the margin. To be honest, I'm not sure why my company sells it.

...a lot of stores seem to run zero-discount "sales". I know that Kmart does it a lot, from when I used to work for them...and when I was just in there today, I noticed big "sale" signs, with "sale ending" dates and everything, hung over the TracFone card price tags...that when I lifted them up, revealed the TracFone cards were exactly the same price. Why do they do it? To call attention to the items, I guess, and hope that people will buy them and think they're getting a bargain (and not bother to lift the tag up to see how much they're "saving").